 "Roomy Khan")
One day in 2008, Sakhawat Khan, a Silicon Valley chip engineer, walked into a small house near the back of his two-acre property that his wife, Roomy, a stock trader, used as a home office. Roomy and Sakhawat met when they were electrical-engineering students at Columbia University. After graduating, Sakhawat started inventing, eventually gathering some 30 semiconductor patents to his name. Roomy, who was more outgoing in social situations and more restless in her appetite for risk, was drawn to Wall Street and joined Galleon Group, a New York hedge fund run by the charismatic, bullish trader Raj Rajaratnam. In 1999, she struck out on her own to trade technology stocks. She thrived.
"I am not kidding when I say I had money," Roomy told me when I met her recently. "I had a lot of money." In the late 1990s, the Khans moved out of their house in Sunnyvale, California - Roomy called it a "khudd", a Punjabi word for "hole" - and bought a 9,000-square-foot mansion in Atherton, the wealthiest town in Silicon Valley. They paid $10.5 million, all cash. The house had a pool, a tennis court and more than half a dozen marble fireplaces. They gave lavish parties for their friends and once, on a whim, spent $50,000 on wine.
When Sakhawat visited Roomy in her office, her eyes were usually fixed on a large Bloomberg terminal, her ear pressed to the phone. But that morning when Sakhawat entered, he found his wife sitting at a large glass-topped table next to an open drawer containing a tape recorder and two phone jacks. "What are you doing taping?" Sakhawat asked. "You know my boss is not good with bonuses, so I want to track the information I give him," Roomy replied.
This was just one of the many lies she told. Since January 2008, as Roomy had ostensibly been going about her usual business, she was secretly assisting the FBI in a long-running investigation into insider trading at Wall Street hedge funds. Khan was the right woman for the job: Since about 2006, she herself had been trading on inside information. When the FBI caught up with her, she began helping them - at first reluctantly and then with theatrical flair.
On the morning of October 16, 2009, Wall Street awoke to images of Rajaratnam flanked by FBI agents outside a federal courthouse, looking subdued and sour, with his hands cuffed behind his back. He had been charged by the United States attorney's office in Manhattan with conspiracy and securities fraud.
Reading newspaper reports about the case, Sakhawat realised that the FBI informant referred to as cooperating witness (CW) in the 34-page complaint against Rajaratnam had to be his wife. CW's recorded telephone calls with Rajaratnam suggested that he had access to inside information, enabling the authorities to uncover the biggest insider-trading network in American history. (He is serving an 11-year sentence.)
It took only a few days for friends and associates of CW's many targets to unmask Khan. The press assailed her as "The Woman Who Ratted on Rajaratnam" and "The Nark in Galleon Bust." In photographs, she was portrayed as dishevelled and sinister. Incriminating episodes from her past were splashed across major newspapers. She and Sakhawat, it was revealed, had been sued by Deutsche Bank for failing to pay off a large promissory note. A few years later, their housekeeper accused the Khans of violating labour laws.
The gleeful bad-mouthing of Khan went on for years: Her flamboyance and her lying made for delectable reading, especially when it emerged that Khan had not been entirely truthful with the FBI. Even after she started cooperating, she manipulated them.
Khan's cooperation did not keep her out of jail. Sentencing her to a year at a women's prison in Coleman, near Orlando, Judge Jed S. Rakoff of the federal court in Manhattan admonished her: "You cannot have it both ways. You cannot obstruct justice and then say, 'Well, because I have done good things since, forget about it.'" Before going to jail, Khan spent her mornings walking along the beach, worrying about how she'd survive in prison. But as she learned serving out her term: "Prison is the easiest part. When you get out and there is nothing there - that is the toughest part."
Starting over
I met Khan in Fort Lauderdale, in September, five months after she was released from prison. Khan was wary of me. She felt bruised by the way the media had demonized her. Since moving to Florida, she has channelled her energies into raising her only child, her adopted daughter, Priyanka. "I have no outside-world connections," she told me. She still tracks a handful of stocks - Apple, Caterpillar and Cummins- on her iPad. She said she has no money to invest. "I do it for the intellectual curiosity. Otherwise my mind would be mush."
Khan is financially reliant on Sakhawat. He has remained loyal to Roomy, but she finds her dependence on him distressing. Khan told me that she hasn't let go of the sheer pleasure she derives from dropping thousands of dollars on fine things. "Why? Because it makes me feel alive."
Khan was born in 1958 into a traditional middle-class family. In January, I met her parents in Delhi, where Khan was raised. Her father, who has a Ph.D. in mathematics, did research on weapons systems for India's department of defence. Her mother, though trained as a linguist, was a homemaker. Khan's parents valued education above all else. But schooling two children strained the family's finances. When Khan was 9 or 10, her parents pulled her out of Rosary, a private school in Delhi where students were taught English. At the state school Khan subsequently attended, almost all her classes were in Hindi except for science. "I went to college, and I barely knew English," she told me. She hung around the English speakers at college and kept silent, listening so that she could speak like them.
In 1981, when Khan was 23, she saw an advertisement in a journal about studying abroad at Kent State. She applied to the university's physics programme, and when Kent State offered her a partial scholarship, she leapt at the chance. In America, her ambitions grew. Bored with studying in a small, provincial town in Ohio, she applied and was accepted to Columbia University's master's programme in engineering, where she met Sakhawat, a Muslim from Bangladesh. In 1985, she followed him to California, defying her parents, who are Hindu and disapproved of her choice. "Yes, we lived together in sin for a couple of years," Khan said, laughing.
In 1995, while she was at Intel, she was given an assignment to do some research on Intel's rival, Advanced Micro Devices, and she called Raj Rajaratnam, who was then an influential analyst working at a boutique investment bank called Needham & Company. They chatted amiably for a while about micro devices, and then their conversation turned to their families. Khan told Rajaratnam that she was Punjabi. Rajaratnam, a Sri Lankan, said that his wife, Asha, was also Punjabi. Over time, Rajaratnam would exploit these sorts of tribal links, cultivating a coterie of loyal acolytes, mostly of South Asian descent, on whom he conferred favor if they gave him occasional tips.
The two struck up a friendship after that, dining together sometimes when Rajaratnam visited California. Though heavyset and not particularly attractive, Rajaratnam was charming - perhaps the brightest man Khan had ever met, she told me. Khan, eager to break into Wall Street, saw Rajaratnam as her ticket out of Intel. She tried to please him, faxing him confidential data giving him a glimpse into Intel's revenue for the quarter. In early 1998, her employer installed a video camera above the fax machine and captured Khan's stealthy communications with Rajaratnam. She quit before the company had completed their internal investigation into her crime. Her next job was working for Rajaratnam at his new hedge fund, the Galleon Group.
As Khan was starting her career trading technology stocks, the business was about to undergo major changes. In 2000, the Securities and Exchange Commission moved to introduce Regulation Fair Disclosure, which required publicly traded companies to share crucial information with all investors simultaneously. Before Regulation FD, companies routinely held one-on-one meetings with hedge-fund managers, at which the companies offered guidance on earnings or provided information about the success of a new product rollout that could have an impact on their bottom line. The culture, especially in Silicon Valley, was chummy, with nascent technology companies vying for Wall Street's attention.
But after Regulation FD came into effect, companies became more guarded about divulging information. The change in Regulation FD heightened competition and tougher markets meant that hedge-fund managers were always seeking new advantages.
In 1999, after nearly a year of working for Rajaratnam, Khan quit Galleon, wanting to start trading her own money in the Internet-stock boom. A month into trading solo, she was visited by FBI agents, who confronted her with the evidence from her indiscretions at Intel. In 2001, she pleaded guilty to wire fraud, and for the next four years, chastened by her crime, she says, she played by the rules and steered clear of Rajaratnam.
Then one day in 2005, "out of the blue, I got a call as I was driving to my house," she recalled. "Raj said: 'Oh, I haven't heard from you. How are you?'
Rajaratnam's call came at a time when Khan needed money; within a few years of the Internet bust in 2001, she had lost $49.6 million, according to her lawyer. But it wasn't only a sense of financial need that led her back to Rajaratnam; "It's almost like you are a drug addict, and you go through rehab, and you are clean," she says. "And then you are constantly at a party every day where people are doing cocaine. How long can you stay clean?"
At Intel, she had broken the rules by supplying inside information to someone else; now she was willing to use it to make money for herself. Khan began tapping her vast network, leaning on friends, associates and even a cousin to find new avenues of information. She invited Sunil Bhalla, an executive at Polycom who was dating one of her close friends, to her home for a holiday dinner in December 2005; a few weeks later, she followed up to ask how his company's quarter was looking. She played auntie to a young woman from Bangladesh who worked for an investor-relations company. Before long, the woman was feeding her information on Google. "That is how you garner all your nuggets in a legal way," she said. She would talk to a young investment analyst she knew in New York named Tom Hardin. "Tom was my buddy," she told me. "We used to barter information all the time."
In 2005, she landed a job at a hedge fund, Trivium, and she liked that Rajaratnam would share information with her that she could pass on to her new bosses. She also hoped by ingratiating herself with Rajaratnam that he might hire her again.
The endgame
On November 28, 2007, Khan was working in her home office in Atherton when she heard a knock on the door. There were two people standing outside, a man and a woman. She did not recognize either of them. But "the moment they showed me their badges, my heart sank," she said.
Khan had been maniacal about covering her tracks, but she was sloppy once. Distracted by the lawsuit with Deutsche Bank and fighting with her housekeeper, she called Bhalla on his cellphone and his home phone. The feds obtained these phone records and discovered that conversations between Khan and Bhalla followed an incriminating instant message Khan sent Rajaratnam: "do not buy plcm till I get guidance." When investigators showed Khan that they had the instant-message exchange, she knew she would have to come clean.
After the agents left Khan's house, she found a lawyer, who advised her to cooperate with the federal investigation. But she figured she could outwit the FBI - she had, after all, gotten off without jail time after her Intel indiscretion.
During her regular trips to New York to meet with prosecutors, she avoided contact with Rajaratnam. "I knew he was the bull's-eye," she says. But she went out of her way to warn others. Khan was so intent on protecting Hardin that at one point, she says, an FBI agent screamed at her: "What does Tom Hardin mean to you?" It's hard to know what Khan's real motives were.
When I visited, Khan was a week away from celebrating her 56th birthday. She seemed addled, struggling to fashion a new identity for herself. Khan has worked since she was 27. When she was trading stocks on her own, she started her days at 6 in the morning and worked till 8 at night. "Even when we had the big money, I worked," she told me. What bothered her the most, she said, is that "the thing that has made me has been taken away from me." Her probation officer suggested she find work as a cashier, but Khan believes she is capable of more.
In December, Khan took the GREs and scored fairly well. She applied to the PhD programme in finance at the Wharton School, among others. She wants to focus on insider trading and white-collar fraud. "I will not be a typical Wharton PhD programme student," she wrote in her Wharton application essay. "However my life experiences, although extreme, have prepared me uniquely to do research on insider trading."
In February, she received a rejection, but she's waiting to hear from several other schools. If she doesn't get in anywhere, she would like to write a book, perhaps go on the lecture circuit, sharing with aspiring traders and business people the cautionary tale of her easy slide into committing crimes.
©2015 The New York Times
